UO BA 318 Online Midterm || A+ Score Secured.
T/F: Sole proprietorships are the most common form of business organization because liability is
limited to the amount invested in the business by the sole proprietor. correct answers F
T/F: The corporate form has the disadvantage of double taxation relative to a sole proprietorship.
correct answers T
T/F: The corporate form has the advantage of unlimited liability. correct answers F
T/F: The corporate form is preferred over the sole proprietorship because a corporation is easier
to form and faces less regulation. correct answers F
Sole Proprietorship correct answers a business owned and managed by a single individual
Corporation correct answers A business owned by stockholders who share in its profits but are
not personally responsible for its debts
The goal of the firm should be: correct answers maximization of shareholder wealth
Agency Problem correct answers the possibility of conflict of interest between the stockholders
and management of a firm
Which of the following statements are true regarding "Agency Problem"?
1. Managers might attempt to benefit themselves in terms of salary and perquisites at the expense
of shareholders
2. The agency problem results from the separation of management and the ownership of the firm.
3. The agency problem may interfere with the implementation of maximizing shareholder
wealth. correct answers All of these are true
, T/F: The corporation is a legal entity separate from it owners; thus it is possible for the
corporation to continue even upon the death of one or more shareholders. correct answers T
Capital structure decisions include all of the following EXCEPT:
1. Deciding the total amount of debt the firm should take on.
2. Deciding the mix of debt and equity for the firm.
3. Deciding what assets to purchase.
4. Deciding how to pay for long term projects. correct answers Deciding what assets to purchase.
capital structure decision correct answers minimizing the cost of capital by using the right mix of
debt and equity
equity financing correct answers funds provided by the owners of a company
Working Capital correct answers short term assets and liabilities
4 Ways to Reduce Agency Problems correct answers 1. Compensation based on firm
performance
2. Board of Directors oversees managers
3. Threat of takeover
4. Bank & Credit Analysis
Sarbanes-Oxley Act correct answers A law passed by Congress that requires the CEO and CFO
to certify that their firm's financial statements are accurate.
Stakeholders correct answers Anyone other than the firm's stockholders or creditors that might
have a claim on the cash flows of a firm
T/F: Sole proprietorships are the most common form of business organization because liability is
limited to the amount invested in the business by the sole proprietor. correct answers F
T/F: The corporate form has the disadvantage of double taxation relative to a sole proprietorship.
correct answers T
T/F: The corporate form has the advantage of unlimited liability. correct answers F
T/F: The corporate form is preferred over the sole proprietorship because a corporation is easier
to form and faces less regulation. correct answers F
Sole Proprietorship correct answers a business owned and managed by a single individual
Corporation correct answers A business owned by stockholders who share in its profits but are
not personally responsible for its debts
The goal of the firm should be: correct answers maximization of shareholder wealth
Agency Problem correct answers the possibility of conflict of interest between the stockholders
and management of a firm
Which of the following statements are true regarding "Agency Problem"?
1. Managers might attempt to benefit themselves in terms of salary and perquisites at the expense
of shareholders
2. The agency problem results from the separation of management and the ownership of the firm.
3. The agency problem may interfere with the implementation of maximizing shareholder
wealth. correct answers All of these are true
, T/F: The corporation is a legal entity separate from it owners; thus it is possible for the
corporation to continue even upon the death of one or more shareholders. correct answers T
Capital structure decisions include all of the following EXCEPT:
1. Deciding the total amount of debt the firm should take on.
2. Deciding the mix of debt and equity for the firm.
3. Deciding what assets to purchase.
4. Deciding how to pay for long term projects. correct answers Deciding what assets to purchase.
capital structure decision correct answers minimizing the cost of capital by using the right mix of
debt and equity
equity financing correct answers funds provided by the owners of a company
Working Capital correct answers short term assets and liabilities
4 Ways to Reduce Agency Problems correct answers 1. Compensation based on firm
performance
2. Board of Directors oversees managers
3. Threat of takeover
4. Bank & Credit Analysis
Sarbanes-Oxley Act correct answers A law passed by Congress that requires the CEO and CFO
to certify that their firm's financial statements are accurate.
Stakeholders correct answers Anyone other than the firm's stockholders or creditors that might
have a claim on the cash flows of a firm
